Senators consider second dip into Texas' rainy-day fund

By Peggy Fikac, Houston Chronicle

Published 8:45 am, Friday, April 22, 2011

Cutbacks to education and human services would be eased but not eliminated under a $176.5 billion budget proposal backed Thursday by the Senate Finance Committee, which endorsed the possibility of an extra dip into the rainy-day fund to pay for it.

"This bill keeps Texas government functioning, and essential services available to Texans, without doing harm to the private sector economy," Senate Finance Committee Chairman Steve Ogden, R-Bryan, said after the committee passed it 11-4. "It's adequate. And I think in these circumstances, adequate is a pretty big deal."

The proposal, however, is already being hit from many sides before Ogden even tries to bring it to the full Senate for consideration next week.

Because of the extra $3 billion it may pull from the state's rainy-day fund, the bill is at odds with positions taken by the House and Gov. Rick Perry, who want to hold the line on spending from the account.

Sen. Dan Patrick of Houston, who cast the committee's lone Republican vote against the proposal, said he was concerned about the possibility of using additional rainy day funds because the state may need the money more in the future.

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The Senate proposal is about $12 billion higher in state and federal funds than the House-backed budget, but is $11 billion, or 5.9 percent, short of current spending levels.

"It does not provide the services that are needed for the state of Texas ... education services, health care, our regulatory agencies are not going to be able to process the people they regulate," said Sen. John Whitmire, D-Houston, who voted against it. "I just know we can do better."

The Senate committee proposal would leave public schools short about $4 billion of the money they would get under current formulas. That is half the House cut, but still would cost 33,700 school district positions statewide, according to one estimate.

The Senate plan also would cut some Medicaid reimbursement rates to health care providers, but by less than the House. It would give no further cut to nursing homes than they already had in the current budget cycle, addressing the threat of massive nursing home closures under House cuts. It still would be $3 billion short of the money needed to cover Medicaid caseloads.

The proposal would cut higher education, but would provide more money than the House to the Texas Grants college financial aid program.

Perry won't go further

The massive cuts are being contemplated because the state is facing a revenue shortfall of $15 billion to more than $27 billion through the next two years.

The House has voted to bridge $4 billion of the gap with spending cuts this year and $3.1 billion from the rainy-day fund. Perry has said he will not sign a budget that pulls more from the fund, and Appropriations Chair Jim Pitts, R-Waxahachie, said Thursday, "I think I've said pretty plain that the House has no stomach to use the rainy-day fund."

The fund is estimated to have $9.4 billion available, although Ogden said the oil and gas prices whose taxes fuel it could drive it up to $12 billion.

Under the Senate committee proposal, the extra $3 billion would be spent from the fund only if the comptroller did not certify enough additional revenue from elsewhere.

Pitts has said he thinks the House could support adding between $4 billion and $5 billion to its bare-bones proposal. House and Senate budget-writers have backed a variety of accounting maneuvers and so-called non-tax-revenue proposals that could help meet that smaller increase.

After voting for the bill, Sen. Juan Hinojosa, D-McAllen, Finance vice chairman, said, "It's like having to choose between the good, the bad and the ugly. The House bill ... is ugly." The Senate bill, he said, "is bad ... The situation we find ourselves in with the governor and the House is, this the best we can do."

Ogden said he believes he has the two-thirds vote needed in the Senate to bring the bill up for debate.